Renters Have Much to Gain by Pursuing Home Ownership

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Zack Diener
Senior Loan Officer, Sales Manager
NMLS #470413
Mann Mortgage, LLC
Downtown Honolulu Office
(808) 349-3777

Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability, and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home and landlords may argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $2,000 per month for a condo, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $139,246. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!

However, if you were to purchase your own house or condominium, you would be on your way toward building equity. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will not go up for the term of the loan. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop lower than the rate you locked in, which would cause your monthly mortgage commitment to go down.

In addition, home ownership could give you some tax advantages. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible for a primary residence. Your mortgage consultant will help you evaluate the tax advantages of various loan scenarios and can share this information with your tax consultant to obtain feedback on your behalf.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These pre-qualification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to discuss your future financial goals with your mortgage consultant…they will then be able to help you choose the loan option that will work best for you on the long term.

A variety of loan programs are currently available, including “low” down payment mortgage programs. The most common loan for people buying their first home is the FHA loan, which only requires a 3.5% down payment. In addition, FHA allows a seller to cover up to 6% of a buyer’s closing costs, which can substantially decrease the amount of money needed to buy the home.

There are also a couple of “zero down” loan programs available in Hawaii. If you are a current or former member of the military, you may be able to take advantage of a VA loan which requires zero down up to a $750,000 loan amount. And keep in mind that FHA and VA allow the lowest credit scores of any loan program today, with a credit score of only 620 required in most cases. Another “zero down” program is the USDA Rural Housing program which is available for the purchase of condominiums or homes in certain parts of Hawaii considered rural. Eligible areas on Oahu currently include Ewa Beach, Kapolei, Makakilo, Waikele, North Shore, and Waimanalo. Call or email your mortgage consultant for the most updated list for all islands.

If there is any RIGHT time to buy it is NOW! Why? Because home prices are increasing in Hawaii and interest rates are still near historic lows. Don’t miss this opportunity to take advantage of the current market before home prices and interest rates rise.

Call me to ask about our closing cost specials for the month of August. To schedule a free pre-qualification appointment, call me at (808) 349-3777 or email me at zack@mannhawaii.com.

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